Indians See Battle Ahead Over Future of Gambling : Tribes: Some states consider ways to scuttle casinos. Competition, political pressures are also seen as factors.

THE INDIANS' GAMBLE. Tribal Economies Are Banking on a Billion-Dollar Betting Industry. Last in a five-part series.

When tribal officials from around the country gathered recently in Atlantic City, they expected to hear a success story from Leonard Prescott, the leader of the Shakopee Sioux.

What they got was a gloomy prediction for the gambling that has become the $1-billion centerpiece of reservation economies.

Prescott's reservation outside Minneapolis, once a wasteland, is wealthy thanks to a sprawling casino, part of it shaped like a huge tepee. But here he was, a gray-suited vision of executive prosperity, telling his fellow Indians: "I see this all falling apart."

It is not a groundless fear.

Even as Indian gambling grows daily--offered on 150 reservations, with many tribes branching out from bingo to slot machines--he sees a battle over its future brewing from coast to coast.

In Washington and Wisconsin, state legislatures already have considered proposals aimed at scuttling reservation casinos. In half a dozen other states, tribes complain that officials are stalling negotiations over compacts necessary to expand their operations.

And if anyone at the Atlantic City conference thought Prescott was being paranoid, they wouldn't any longer if they knew of a meeting scheduled only days later in Washington, D.C. On June 5, both U.S. senators from Nevada, the nation's gambling capital, met with then-Atty. Gen. Richard Thornburgh. Their purpose? To urge action against "a lot of illegal gambling on Indian lands," a federal official confirmed.

Indian gambling is "a window of opportunity that's going to be closed," said Whittier College law professor I. Nelson Rose, an expert on gambling trends.

As he sees it, politicians and the public simply didn't understand the implications of a series of court decisions and the 1988 federal law that gave Indians competitive advantages in far more than the social game of bingo.

"Once they see full-scale casinos (on Indian land), with craps and blackjack," Rose said, "they're going to close it down."

Jeanette Hayner wasn't waiting for the casinos to open. Hayner, the majority leader in the Washington state Senate, thought the federal government was forcing big-time gambling on her turf. "It's unfair," she declared, determined to head it off.

Later, an attorney for the Tulalip Tribes offered his own term for the resulting confrontation: "Indian bashing."

It began when eight of the state's reservations sought compacts under the Indian Gaming Regulatory Act. Congress said states must negotiate such agreements, allowing tribes to offer high-stakes versions of any type of gambling "not specifically prohibited" there.

Because nonprofit groups in Washington can stage "Reno nights," with many casino games, Indians also could run those games. But while social clubs are limited to two fund-raisers a year, with $10 maximum bets, tribes are exempt from such regulations--and thus planned year-round gambling with bets up to $100.

Hayner was furious: Washington's voters or legislators had never approved real casinos like that; the state would get nothing because tribal businesses aren't taxed, and then there was the seamy side of casinos elsewhere, the "racketeering, prostitution, drug dealing," she said.

But how to stop them? The state's attorney general suggested a strategy--close the legal loophole. Ban the charity games.

The Tulalip attorney, Doug Bell, replied: "They've had charitable casino gambling for 18 years and there was never this concern. But when the red man does it, 'Here comes the Mafia.' There's a legislative tantrum."

Amid heated debate, Hayner's bill passed the state Senate, 27 to 21. It stalled in the House in June, however, when Elks and Moose clubs lobbied against it, eager to keep their fund-raising tool. Even then, the Indians were hardly in the clear.

While Hayner is considering new strategies to stop "gambling without restrictions," only one Washington tribe has reached a compact with the state. Others complain that officials still won't agree to all the gambling they want.

Nationally, only 21 tribal-state compacts have been completed in the three years since the gaming act passed--11 of those in Minnesota, where officials have been uniquely receptive to Indian casinos, including slot machines. Elsewhere, conflict has been the rule.